Thursday, April 15, 2010

What's the Value of a 'Fan' on Social Media?

[brandweek] Brands have rushed to Facebook to build fan bases, with some amassing millions of connections. The nagging question has been: What is the monetary value of these fans?

Social media specialist Vitrue, which aids brands in building their customer bases on social networks, tried to put a media value on such communities.

The firm has determined that, on average, a fan base of 1 million translates into at least $3.6 million in equivalent media over a year.

The company's findings are based on impressions generated in the Facebook news feed, the stream of recent updates from users' networks.

Vitrue analyzed Facebook data from its clients -- with a combined 41 million fans -- and found that most fans yielded an extra impression. That means a marketer posting twice a day can expect about 60 million impressions per month through the news feed.

"It's important to understand that once you build that fan base, you want to make sure you're leveraging it," said Michael Strutton, chief product officer at Vitrue.

Not all brands are created equal. Vitrue found wildly divergent impression-to-fan ratios. Some marketers generated just .44 impressions per fan, while another saw 3.6 impressions. Strutton chalked that up to sexier brands having more engaged connections, giving them access to the news feed more often. The impressions are not unique.

Vitrue arrived at its $3.6 million figure by working off a $5 CPM, meaning a brand's 1 million fans generate about $300,000 in media value each month. Using Vitrue's calculation, Starbucks' 6.5 million fan base -- acquired in part with several big ad buys -- is worth $23.4 million in media annually.

Of course, the figures don't include perhaps the most powerful incentive for brands building fan bases: social customer-relationship management. Marketers often use their Facebook hubs to inform fans of new products, services and promotions.

"When you start to [add] engagement value, it goes higher," said Strutton. "We were trying to get an easy-to-understand valuation terminology."